AAPL: Baird, RBC Ponder iPhone 5 Supply Constraints

By Tiernan Ray

The Street today is fretting further about a lack of supply of Apple’s (AAPL) new iPhone 5, worries amplified by conflicting reports over the weekend of labor unrest at Foxconn Technologies, which assembles the iPhone.

R.W Baird’s William Power, who has an Outperform rating on Apple shares and a $750 price target, today offers up his data from talking with Apple, AT&T (T), Verizon Communications (VZ) and Sprint-Nextel (S) retail stores last week about Apple’s iPhone 5.

Power notes broad lack of availability at Apple’s own stores and at the carriers, writing “our nightly online checks turned up zero iPhone inventory at Apple stores across the country.

“Although we have heard reports of successful early morning walk-in purchases, Apple Store reps who we called consistently told us that there were no iPhone 5s available for walk-in purchase, regardless of location or time of day.”

He continues, “Although we were still able to find an occasional store with an iPhone 5 available for sale, those instances were rare and usually limited to less populous geographies.”

And RBC Capital’s Amit Daryanani, reiterating an Outperform rating on Apple shares, and a $750 price target, today boosted his September-ending fiscal Q4 estimate for iPhone units while cutting his December-quarter number, in order to reflect the 5 million-plus units Apple said it sold the first weekend the device went on sale, and to “reflect headwinds from Supply Chain constraints that may impede iPhone 5 sell through rates.”

Daryanani now models 24.8 million iPhones for last quarter, up from 20 million, and 49 million units this quarter, down from 57 million.

Nevertheless, Daryanani still sees December remaining a heavy growth quarter for Apple for iPhone:

We believe iPhone sales will be skewed more toward the December and March quarters in the future if Apple continues to announce updates to its product toward the end of each calendar year. Notably, the December quarter has seen tremendous growth over the past four years with Y/Y unit growth of 88% (Q1:09), 100% (Q1:10), 86% (Q1:11), and 128% (Q1:12). In our view, a redesigned version of the iPhone every two years will likely result in higher unit sales relative to the iPhone ―S‖ versions as carrier contracts last roughly two years and consumers have historically been attracted to the new design concepts created by Apple.

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There are 16 comments

OCTOBER 8, 2012 12:06 P.M.

freddysrevng wrote:

Where have all the "AAPL $1,000 per share" iTard Analysts gone? You know Geno Munster and his ilk? They slink into spider holes at any whif of adversity. Funny really.

Also, if the iPhone 5 is going to move the GDP of the USA, shouldn't this dip in AAPL price be the "Deal of the Decade"???

Help a brother out, Fanboys...

OCTOBER 8, 2012 12:08 P.M.

freddysrevng wrote:

Oh, and since it is Monday, we have to practice our chant.... "Did you hear that AAPL missed its number for the 3rd Quarter in row"????

All together now...

OCTOBER 8, 2012 12:10 P.M.

Bill wrote:

Talked to Apple sales rep in Oklahoma city. He said they get Iphone5 shipments daily and sell out daily. Salesman said if you ordered online you can pick up your Iphone5 at the apple store 1 to 2 days later.

OCTOBER 8, 2012 12:12 P.M.

freddysrevng wrote:

Lastly, last week or two weeks ago, when some issues were brought up at Foxconn - it was reported that they do not make the iPhone 5 at Foxconn. Now, all of a sudden they do..... Be very careful with this stock and the "Fanboy Media Complex" - they use you....

OCTOBER 8, 2012 12:20 P.M.

Bill wrote:

Samsung and Google own Apple and
are laughing all the way to the bank. They
are stealing market share, customers and
own all the positive headlines, while Apple
and Tim Cook file more useless lawsuits,
sit silent in Cupertino, waste money handing
out useless dividends, get it stuck up
their as- by China and Foxconn, and get more
Negative press everyday. The facts are that
Cook will miss earnings again. He is suppose to
be a supply chain guru, but has no inventory
in the biggest product launch in history
and now has to bend over while China
tells him where the dog died. Even if Cook
sneaks out a small win for this QTR earnings
it doesn't matter. The street has already taken
the stock down 100 while Cook and his
Cronies sit on the Ivory Apple Tower in
CA thinking once again they are invincible.
Well this time Tim the Apple empire will
fall and fall hard while you try to understand
why investors and shareholders are starting
to dislike you

OCTOBER 8, 2012 12:43 P.M.

Jonny Ringo wrote:

Nothing goes up forever and everything eventually fades away, the only question is how far up can a company go before the competition catches up?

Well most experts that are impartial will tell you the competition has already caught up and the only 'Advantage' Apple has going forward is a Halo effect. However this doesn't appear to want to linger on for much longer. One should consider the results of Apple's actions, such as omitting Adobe Flash, Antennagate, Apple Maps and the hyperbole behind future products that are nothing other than Fanboy imaginations. One should also consider the Irony behind Apple lawsuits against anyone that dares compete against Apple. The facts and history will tell you Apple is one of history's greatest copycats.

OCTOBER 8, 2012 12:50 P.M.

Whatever wrote:

All you naysayers, especially "Bill", will be eating crow come the first of the year.

OCTOBER 8, 2012 1:17 P.M.

Ed wrote:

Wow, all I head is headwinds and Apple.
They must be the only boat in the water,
as Samsung sails along at record speed

Give me a break. Apple is done

OCTOBER 8, 2012 1:33 P.M.

priscilla wrote:

Supply uncertainty continues to unnerve investors. AAPL remains stuck in a rut until management sheds some light on this issue. Apple silence on this subject lends credence to any rumors and innuendos on labor and production yield issues regardless of how ludicrous or unrealistic they sound.

Apple had a chance to quell supply fears, but refused to do so when it failed to provide iP5 sales for the first full week. This gives hedgies and shorts the ammunition to rattle the cage and shake loose more weak hands and selling begets more selling. Unfortunately, investors may have to endure the relentless fud attack until earnings release on the 25th.

That said, AAPL is way oversold and ripe for a strong bounce at any time. A catalyst for the bounce could be the release of invites on the 10th for iPad mini and Mac upgrades event.

OCTOBER 8, 2012 1:41 P.M.

jordy wrote:

many people are saying that apple will not be able to keep growing. there main reason is the law of large numbers. basically what they are saying is: "it´s never been done before therefore it is impossible." I see apple having another record year in FY2013 due to increased Iphone and Ipod sales. the Ipad sales also continue to grow rapidly. the Ipad mini has huge potential, not just for profit but if priced between 199-299 it will be a great "gateway product." there is also huge potential for dividend increases and share buy backs that will drive stockprice. I am long Apple since 2009 when I started studying. at this rate I could be living of apple stock income after receiving my PhD. now is the perfect buy moment I just bought another 20 stocks for 638 a piece and expect a stock price over 900 before FY 2014.
p.s for all people saying the company will fail due to things like apple maps: microsft has the worst reputation, makes shitty products and still makes a profit. imagine what Apple can do!

OCTOBER 8, 2012 1:47 P.M.

Simpletech wrote:

>Daryanani now models 24.8 million iPhones for last quarter, up from 20 million, and 49 million units this quarter, >down from 57 million.

Lat qtr ended 8 days ago. So he woke up one morning and decided to model with 24.8M?? Where was he when he modeled with 20M for Sept qtr and 49M for the Dec qtr??

OCTOBER 8, 2012 2:57 P.M.

Anonymous wrote:

@ freddysrvng

Reading your stuff is like watching a guy on stage playing air guitar. Go Freddy go.

OCTOBER 8, 2012 3:30 P.M.

mike wrote:

yawn...
Apple reported 5 mil on Monday morning after launching that Friday. Online sold 2x as many in an hour. I hate defending a stock cause it seems like bad luck but use some common sense folks.

In three countries Apple sold 5 mill phones in 3 days with only one shipping day (Friday). That means it had a week to sell the rest of the volume in route (maybe a million, prolly 2) as well as launching in 22 countries the following friday with the month ending on a Sunday (3 more sales days).

7 million + 3 million is 10 million phones sold. Not to mention when I went into a store to buy one on launch day he stated they were out of ALL phones (iphone 4s as well).

Earnings will be a surprise and it shouldn't be.

OCTOBER 8, 2012 5:02 P.M.

Sue wrote:

Can't wait for Tim Cook to announce the
iPod 5 next week. That will surely put
the stock over 700 and threaten Google
and Samsungs dominance over Apple.

OCTOBER 8, 2012 6:05 P.M.

ThewayIcit wrote:

It all about the fundamentals for this stock at a PE of 15. Revenue and EPS trumps all else over the next two quarters. Guidance given on October 25 coupled with the reception by consumers of the IPAD mini will play a role in the timing of the next leg up.

About Tech Trader Daily

Tech Trader Daily is a blog on technology investing written by Barron’s veteran Tiernan Ray. The blog provides news, analysis and original reporting on events important to investors in software, hardware, the Internet, telecommunications and related fields. Comments and tips can be sent to: techtraderdaily@barrons.com.